Bulletin 1999 V30-2N.C. Department of Revenue addresses
By Emmet R. Wood, Director of Audits and Investigations
Information for this article was provided by Andy Sable, Assistant Director of the Sales and Use Tax Division at the North Carolina Department of Revenue.
Under North Carolina law, operators of short-term rental businesses (hotels, motels, tourist homes, vacation cottages, etc.) must collect and remit a 4% state sales tax and applicable county sales tax on their gross rental receipts. The sales tax is due when the rental occurs (tenant possession of accommodations) and the receipts are collected. [Note: The law exempts real estate rented for less than 15 days in a calendar year or rented to the same person for at least 90 continuous days.]
According to the law, "if a rental agent is liable for the tax . . . the owner is not liable." Licensees should be aware of the tax law and its application to various aspects of property management.
The chart below lists fees typically charged the tenant by the rental agent and indicates whether or not the agent is responsible for collecting and remitting sales tax on the fees.
If you desire further information, the Department of Revenue invites you to contact one of its field offices or the Taxpayer Assistance Section at 919/733-3661. Or write Taxpayer Assistance, Office Services Division, North Carolina Department of Revenue, P.O. Box 25000, Raleigh, N.C. 27640.
The Commission reminds you that its "Trust Account Procedures for Resort Property Managers" course addresses sales and use tax as well as other issues of interest to rental agents. The Commission's Trust Account Caravan takes the course to coastal and mountain areas each spring. [Please see article on page 9 of this Bulletin.]
|Collect & Remit
|Reservation Fee to reserve accommodations||Yes|
|Cancellation Fee to cancel a reservation||No|
|Pet Fee for the privilege of bringing a pet during occupancy of the rental unit||Yes|
|Cleaning Fee to clean the unit after occupancy||Yes|
|Transfer Fee for changing to a different rental unit, different week, etc.||Yes|
|Rebate paid to agent by vendor who rents furniture, linens, etc. to tenant||No|
|Rental Fee received from tenant to whom agent rents furniture, linens, etc.||Yes|
|Trip Cancellation Insurance Premium paid to insurance company||No|
|Security Deposit on the rental unit||Yes|
|Security Deposit (and sales tax) refunded to tenants||Tax Credit|
|Security Deposit Deduction for damages||Yes|
|Returned Check Charge on tenant's check||No|